Banks must lend or SMEs will look elsewhere for funding

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For our latest cash flow and finance panel suggests that bank lending – or lack of – remains a major bug-bear for small businesses.

A huge 94% of firms see improved access to finance from mainstream lenders as ‘important’ or ‘very important’, with 40% reporting that their cash position has not improved over recent months.

While some firms are seeing improvements with the lending situation, many more are seeing a deterioration and would like to see the banks provide more in the way of support.

But are the banks at the moment, post Libor and post rate swap scandal, really focussing on this most crucial of issues? It seems unlikely, and the broken relationship between the banks and SMEs are quite possibly at their most broken.

But when you hit rock bottom, there’s only one direction to go.

While small business owners are likely to feel some sense of vindication that the banks are currently being taken to task, and the mood of the nation quite understandably remains one of seething anger at the banks’ behaviour of late, clearly mainstream lenders are centrally important to them.

But banks can and must do a lot better, and we are calling for improved levels of service, including more branches, faster and more transparent decision making and greater choice.

That said, while there is caution in some quarters over alternative forms of funding, our latest research suggests that, if these improvements are not delivered, many entrepreneurs alienated by mainstream lenders are more than willing to vote with their feet and explore newer, more innovative financial services less dependent on automated risk criteria.

There is an important role to be played by accountants and other financial advisers – including bank representatives – in guiding them in the direction of funding solutions that work for their businesses.

Of course, reducing business costs and making inroads into tackling the huge problem of late payment would also improve the situation greatly. Again, this is an area which our research suggests is getting worse. For 26% of respondents late payment has improved, but for 43% it has deteriorated.

Good credit control is essential for all businesses to run smoothly. Bad credit control can break a firm, chasing unpaid invoices a colossal drain of their manpower and morale. This is why we offer all our members free access to our credit control guide to help them navigate what is a rocky road.

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